Which of the Following Is an Example of Crowding-Out

question 162

Multiple Choice

Which of the following is an example of crowding-out?

• A) The government invests in education,shifting the long-run aggregate supply curve to the right.
• B) The government lowers taxes,but spending does not increase.
• C) The government increases spending but does not increase taxes,and the size of the deficit increases.
• D) The government adopts a balanced budget amendment.
• E) The government pays $2 million to workers who have lost their jobs in the form of unemployment compensation.

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Definitions:

Risk Premium

The extra return expected by an investor for holding a higher-risk investment over a risk-free asset.

Factor Portfolios

Investment portfolios constructed to have a high sensitivity to certain factors or characteristics expected to yield higher returns, such as size, value, or momentum.

Pricing Model

A theoretical approach used to determine the price of a financial instrument or the valuation of a company.

Risk-Free Rate

The risk-free rate is the theoretical rate of return of an investment with zero risk, serving as a benchmark for measuring financial instruments' risk.